Notes on technical efficiency estimation with multiple inputs and outputs

Notes on technical efficiency estimation with multiple inputs and outputs

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Article ID: iaor201530461
Volume: 249
Issue: 2
Start Page Number: 784
End Page Number: 788
Publication Date: Mar 2016
Journal: European Journal of Operational Research
Authors:
Keywords: performance, production, finance & banking
Abstract:

Collier, Johnson and Ruggiero (2011) deal with the problem of estimating technical efficiency using regression analysis that allows multiple inputs and outputs. This revives an old problem in the analysis of production. In this note we provide an alternative maximum likelihood estimator that addresses the concerns. A Monte Carlo experiment shows that the technique works well in practice. A test for homotheticity, a critical assumption in Collier, Johnson and Ruggiero (2011) is constructed and its behavior is examined using Monte Carlo simulation and an empirical application to European banking.

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